Microsoft Concedes Windows 8 Misses Expectations

Just six months into one of Microsoft Corp.'sMSFT-0.38% biggest fix-it projects, the company has gone back to the drawing board.

The software giant, in an unusually frank admission about the shortcomings of its Windows 8 operating system, has confirmed that it is making changes to its sales strategy and to its software to address user complaints with a coming update dubbed "Windows Blue."

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Visitors try out Windows 8 Surface tablet computers.
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"The world is changing and changing fast, and frankly we also didn't get everything we dreamed of done in the first release," said Tami Reller, a co-head of Microsoft's flagship Windows business, in an interview last week.

Ms. Reller said Microsoft plans in coming weeks to provide more details about the product, which will introduce new features and address user gripes that Windows 8 is too confusing to use. She didn't provide details in the interview or in a corporate blog post on Tuesday.

Last fall's launch of Windows 8 was supposed to be a milestone for Microsoft, but just a few months in, the company announces a reboot is on the way. George Stahl reports. Photo: Microsoft.

But analysts have speculated that Microsoft may change one of the focus points for Windows 8 haters: the removal of the familiar Microsoft "Start" menu, and a sometimes awkward fusion of the traditional Windows desktop with a new type of screen showing rows of colorful tiles similar to a smartphone screen. Some users have said they dislike having to move back and forth between those modes.

"Almost everybody in the tech industry already knows the [Windows 8] experience is suboptimal," said Patrick Moorhead, president of research firm Moor Insights & Strategy. "Microsoft was the last one…in the room to realize this was the case."

Windows 8, the operating software launched in October, was intended to catapult Microsoft and its allies into the market for new kinds of computing devices—including tablets—and help generally get consumers more interested in buying new personal computers. Six months after the operating software's debut, it isn't yet a hit by the accounts of some PC executives and research firms.

One market-research firm, IDC, went so far as to say that Windows 8 did more than fail to revive the PC market—it actually turned off users with changes to basic elements of the widely used operating system.

Ms. Reller disputed IDC's contention, and said the company is seeing steady if not steep sales progress. She said Microsoft has sold 100 million copies of Windows 8 since October, up from 60 million in January.

Microsoft's willingness to shift strategy on Windows 8 is a test for Microsoft Chief Executive Steve Ballmer, whose leadership has been criticized by some investors. Mr. Ballmer placed a high-profile bet on a computing philosophy that PCs, tablet computers and smartphones should share common elements, style and underlying software.

"Windows 8 is simply the biggest deal from our company in at least 17 years," Mr. Ballmer said at a July event.

The hiccups for Windows 8, however, have spotlighted the sometimes-awkward fit when software is grafted onto both a tablet computer used for watching movies and surfing the Web, and on a 27-inch desktop computer primarily for workplace functions.

Microsoft rival Apple Inc.AAPL-0.87% has different software for tablets and for computers, believing the tablet is a separate computing category altogether and it shouldn't try to be a PC in a different guise.

As part of a wave of changes that Microsoft is planning in coming months, Ms. Reller outlined how Microsoft is working on helping people overcome obstacles to learning a dramatically revamped software, altering the shopping experience for consumers, getting more of people's favorite apps available for Windows 8, and making sure a wider array of Windows 8 computing devices will be on sale.

Ms. Reller repeated what Windows 8 users and retailers have said for many months—Windows 8 is a better experience on touch-screen devices—and vowed that Microsoft will put all its weight behind touch-screen devices. But Ms. Reller conceded Microsoft missed a sales opportunity by not having enough touch-screen Windows 8 devices out of the gate, especially at prices that are hundreds of dollars and not in the range of $1,000 as some higher-end Windows 8 touchscreen computers have been.

"If we could have done a better job accomplishing that in the holiday launch or in the selling season following, that certainly would have made a positive difference," Ms. Reller said. She said Microsoft has been having discussions with PC makers such as Dell Inc. to help them figure out what devices should get the most attention, so they're not making bets on an unsustainable number of different devices.

Ms. Reller also said Microsoft is spreading the message to retailers that if they want help from Microsoft's marketing and promotional muscle, they will need to offer more and more variety of touchscreen Windows 8 machines.

Microsoft also missed a sales boom of the small tablets that suddenly became popular with consumers last fall. People familiar with Microsoft's product plans have said the company didn't anticipate the rise of sub-8-inch tablets, which comprised nearly half of the tablet market in the fourth quarter, according to IDC.

Ms. Reller in the interview said Windows technical staff responded "awfully darn fast" to the surge of sales of devices such as Google Inc.'s 7-inch Nexus tablet and Apple's 7.9-inch iPad Mini.

Ms. Reller declined to discuss Microsoft's plans for more homegrown computing devices in addition to two models of its Surface tablet-style computer introduced since October. The Wall Street Journal has reported Microsoft is working on a new lineup of its own devices including a 7-inch tablet.

For the updated Windows software, Microsoft plans two updates in coming weeks.

First up will be details about pricing, packaging and an official name to replace the Blue code name. The new software will be available later this year in time for the holiday season, Ms. Reller said.

On Tuesday, Microsoft also said a test version of the new Windows software will be available in late June.

A second Blue update will explain the technical vision, address customer feedback about Windows 8, and outline options for new types of Windows 8 machines, she said.

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